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Some Aspects of the Economics of Catastrophe Risk Insurance

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  • Christian Gollier

Abstract

The ability to share risk efficiently in the economy is essential to welfare and growth. However, the increased frequency of natural catastrophes over the last decade has raised once again questions associated to the limits of insurability in a free-market economy, and to the relevance of public interventions on risk-sharing markets. In this paper, we explore the potential reasons for the lack of insurance specifically associated to catastrophe environmental risks. Our final aim is to link each source of possible market inefficiency to its possible remedies.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1409.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1409

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  1. Christian Gollier, 2004. "The Economics of Risk and Time," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262572249, December.
  2. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  3. Boyer, Marcel & Laffont, Jean-Jacques, 1994. "Environmental Risks and Bank Liability," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 45, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Deaton, A., 1989. "Saving And Liquidity Constraints," Papers, Princeton, Woodrow Wilson School - Public and International Affairs 153, Princeton, Woodrow Wilson School - Public and International Affairs.
  5. Baxter, M. & Jermann, U.J., 1993. "The International Diversification Puzzle is Worse than you Think," RCER Working Papers, University of Rochester - Center for Economic Research (RCER) 350, University of Rochester - Center for Economic Research (RCER).
  6. Raviv, Artur, 1979. "The Design of an Optimal Insurance Policy," American Economic Review, American Economic Association, American Economic Association, vol. 69(1), pages 84-96, March.
  7. GOLLIER, Christian, . "Pareto-optimal risk sharing with fixed costs per claim," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -774, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Eeckhoudt, L. & Gollier, C., 1996. "The Insurance of Low Probability Events," Papers, Toulouse - GREMAQ 976.423, Toulouse - GREMAQ.
  9. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 90(4), pages 630-49, November.
  10. Christian Gollier, 2003. "To Insure or Not to Insure?: An Insurance Puzzle," The Geneva Risk and Insurance Review, Palgrave Macmillan, Palgrave Macmillan, vol. 28(1), pages 5-24, June.
  11. Geoffrey Heal & Howard Kunreuther, 2003. "You Only Die Once: Managing Discrete Interdependent Risks," NBER Working Papers 9885, National Bureau of Economic Research, Inc.
  12. Kunreuther, Howard & Hogarth, Robin & Meszaros, Jacqueline, 1993. " Insurer Ambiguity and Maarket Failure," Journal of Risk and Uncertainty, Springer, Springer, vol. 7(1), pages 71-87, August.
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Cited by:
  1. Rodrigo S. Targino & Gareth W. Peters & Georgy Sofronov & Pavel V. Shevchenko, 2013. "Optimal insurance purchase strategies via optimal multiple stopping times," Papers 1312.0424, arXiv.org.
  2. Mario Jametti & Thomas von Ungern-Sternberg, 2009. "Hurricane Insurance in Florida," CESifo Working Paper Series, CESifo Group Munich 2768, CESifo Group Munich.
  3. Mario Jametti & Thomas von Ungern-Sternberg, 2006. "Risk Selection in Natural Disaster Insurance – the Case of France," CESifo Working Paper Series, CESifo Group Munich 1683, CESifo Group Munich.
  4. Matthias Schmidt & Hermann Held & Elmar Kriegler & Alexander Lorenz, 2013. "Climate Policy Under Uncertain and Heterogeneous Climate Damages," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 54(1), pages 79-99, January.
  5. Mario Jametti & Thomas von Ungern-Sternberg, 2010. "Risk Selection in Natural-Disaster Insurance," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 166(2), pages 344-364, June.
  6. Feduzi, Alberto & Runde, Jochen, 2011. "The uncertain foundations of the welfare state," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 80(3), pages 613-627.
  7. Zhu, Wenge, 2011. "Ambiguity aversion and an intertemporal equilibrium model of catastrophe-linked securities pricing," Insurance: Mathematics and Economics, Elsevier, vol. 49(1), pages 38-46, July.

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